While PC market rebounds, Apple slips into 5th place in US

And since we want to be on the same page, let me define quality for you:1) Looks good2) Feels good3) Works well4) Is enjoyable to use (as opposed to frustrating or annoying)5) Is recognized by the general public (quality builds a reputation)

Here's a hint. Quality isn't cheap. For all those above named brands I can give you something much cheaper that does the same thing: Kia, Chevrolet, Chrysler, LG, SunBeam, T-Fal, Dirt Devil, Hoover, and Bic.

Cheap works, don't get me wrong, but you're arguing quality, and quality is never cheap.

This is a common misuse of the term 'quality', and its a revealing list. Kirby and Dyson are simply crap vacuum cleaners, but with a high end image. Lexus, unlike the rest of the equally good quality Toyota line, is luxury goods. KitchenAid is good durable workmanlike stuff, not particularly expensive and not a luxury good. What all these have in common? Image in someone's mind. To OC, these are all designer goods and there is a completely illusory association made between how good they are as cars, cleaners, mixers or whatever, and how much they cost. This confusion is then applied to Apple.

There are low volume luxury goods brands, which sell on being that, and where less expensive products from higher volume main market suppliers are better, work better, as vacuum cleaners, cars, computers, watches, whatever. Apple is in this segment. Get a Shuttle, or an Asus T3 series, or lots of other middle range stuff, and you will get something with little designer cachet, but which is better hardware. Better cooled, better components, easier to work on, quiet, nice looking. Hackintosh it, if you really want OSX, which in turn is no better 'quality' than Linux or Windows. Different strengths and weaknesses, but not overall any better.

Its like arguing that some niche designer jeans are 'better quality' than Levis. No, they are not. They are designer however, and some people think that is worth paying more for. It makes them feel good. Which is just fine, just don't make the mistake of thinking that AS JEANS they are any better. The same thing applies to watches, as an example. It is not true that expensive Swiss brands are any better as watches than mass market products, and often (like Apple) they just use the same mechanism in a fancy case.

The other day I bought a watch. I wanted something plain, steel, black numbers on white dial. I really didn't care how much it cost, within reason. Funnily enough, the one that looked nicest, clearest, best made, and closest to what I had in mind was a $20 Timex with a good black leather strap. Pay more, at least in that store, and get less and uglier. I bought it. And am very happy with it. But I have an acquaintance who bought some years ago a genuine Rolex or something similar, and also bought a fake one exactly like it for $10.00. Why did he do that? Because every now and then the Rolex had to go off to be cleaned, and he could not bear to be seen wearing anything of a lesser brand. I on the other hand am totally uninterested in the brand of the watch, all that counts is the functionality. Go figure...

Netbook sales are up dramatically and thus take up more and more of the total market by percent. We all know Apple isn't in this part of the market (by design, never mind the tablet its working on) and if what you're looking at is units sold as a percentage of the total number of units sold then indeed Apple is lagging.

But that's all so misleading and Ars knows that. Apple is growing its user base by impressive numbers Y/Y. In the areas of the market where it competes, Apple dominates sales by percentage of units sold. Too bad iPhones and Ipod Touchess aren't considered computers (because they certainly are). Then we'd see some interesting market share numbers.

Pity that Ars is willing to fuel the trolls to win some eyeballs. Tsk Tsk, Ars.

I'm going to leave your ill-considered gavel-smiley as a sign of warning to future generations: understand finance before you comment on it.

Fiscal Year DOES NOT EQUAL Calendar Year.

Think about what you are saying. "1Q2010" That's now. It's about 15 days old. 1Q2010 ends on March 31st...meaning there is no available data for it, because it hasn't happened. Most companies haven't even filed their 4Q 2009 results (Microsoft among them).

Miscrosoft runs their Fiscal Year 6 months ahead of the Calendar Year. Many companies do this, for various reasons (tax benefits, to synchronize with vendors or customers buy/sell cycles, etc).

By GAAP, Microsoft wasn't and isn't able to claim any revenue from Windows 7 on the P&L until the product is actually sold (meaning October, at the earliest).

I know that the calendar and fiscal years don't match. Works the same way at a university.

Regardless if Apple slipped into 5th place, they still had a record quarter over the holidays with record growth to include growth in market-share. The fact that Toshiba past them only means that someone else besides Apple lost market-share.

No matter. My original point still stands. Microsoft will be overtaken by Apple this year in both Revenue and Profit.

This is a common misuse of the term 'quality', and its a revealing list.[/quote]

Then please explain!

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Kirby and Dyson are simply crap vacuum cleaners, but with a high end image.

How so? Kirby offers lifetime repair and replacement for the price. I don't disagree that one vacuum will largely do the same job as another, and that's the definition of commodity, but the features that define quality? Lifetime warranty, metal construction, heavy weight, gears, and interchangeable components aren't offered in many other vacuums. Dyson's claim to quality is unique technology and high performance.

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Lexus, unlike the rest of the equally good quality Toyota line, is luxury goods.

And the price premium? Quality, or not?

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KitchenAid is good durable workmanlike stuff, not particularly expensive and not a luxury good.

And yet still three times the price of a Sunbeam mixer!

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What all these have in common? Image in someone's mind.

Actually, no. KitchenAid blenders and mixers actually do last for 20 years. So do Lexus and Kirby.

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To OC, these are all designer goods and there is a completely illusory association made between how good they are as cars, cleaners, mixers or whatever, and how much they cost.

You confuse "good" with quality. I make no claims on how good they are, though in some aspects that is definitely a measure of quality too.

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This confusion is then applied to Apple.

Not at all. My association of Kirby with Apple, for example, is the solid metal construction of the case. My association of Lexus with Apple is the upmarket branding of essentially the same components as the competition into a luxury model. My association of Apple with Cross is the "executive" appeal of the MacBook Air. My association with BMW is their reputation in their respective industries, driving for one, ease of use in the other. My association with Mercedes is also their reputation, executive.

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There are low volume luxury goods brands, which sell on being that, and where less expensive products from higher volume main market suppliers are better, work better, as vacuum cleaners, cars, computers, watches, whatever.

Yes, and none of that defines quality. Because if it did none of these products would sell!

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Apple is in this segment. Get a Shuttle, or an Asus T3 series, or lots of other middle range stuff, and you will get something with little designer cachet, but which is better hardware. Better cooled, better components, easier to work on, quiet, nice looking.

But not nicer looking, not lighter, not quieter, not simpler, not more virus-proof, not longer battery, etc. It's the "er" part that people are paying for.

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Hackintosh it, if you really want OSX, which in turn is no better 'quality' than Linux or Windows.

Demonstrably wrong. OS X gets better battery life and it is immune to Windows malware. At least two measures by which someone using OS X has a better experience.

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Different strengths and weaknesses, but not overall any better.

Oh, no, not overall better, but again there are places where you can measurably state superiority for OS X.

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Its like arguing that some niche designer jeans are 'better quality' than Levis.

Um, Levi's are niche designer jeans. Have you seen their prices? I mean, yes, cheap compared to Lucky brand, but compare Levi's to JC Penny's brand (Arizona)? It's still two to three times as expensive. Levi's is the equivalent of Apple!

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No, they are not. They are designer however, and some people think that is worth paying more for. It makes them feel good.

Lucky brand is even more premium than Apple! You need to rethink your comparison if you don't think Levi's are like Apple. The store brand $15 jeans are just as usable as the $40 Levi's brand.

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Which is just fine, just don't make the mistake of thinking that AS JEANS they are any better.

Yet you already have.

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The same thing applies to watches, as an example. It is not true that expensive Swiss brands are any better as watches than mass market products, and often (like Apple) they just use the same mechanism in a fancy case.

I think somehow you're missing the point. If quality were defined by the mechanism (solely), nothing beyond a $15 Casio or $400 Inspiron would sell.

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The other day I bought a watch. I wanted something plain, steel, black numbers on white dial. I really didn't care how much it cost, within reason. Funnily enough, the one that looked nicest, clearest, best made, and closest to what I had in mind was a $20 Timex with a good black leather strap. Pay more, at least in that store, and get less and uglier. I bought it. And am very happy with it. But I have an acquaintance who bought some years ago a genuine Rolex or something similar, and also bought a fake one exactly like it for $10.00. Why did he do that? Because every now and then the Rolex had to go off to be cleaned, and he could not bear to be seen wearing anything of a lesser brand. I on the other hand am totally uninterested in the brand of the watch, all that counts is the functionality. Go figure...

Which means this entire argument is lost on you.

What a waste of time. You don't care about quality, you care about utility. A Kia is the same as a Honda is the same as a Chevrolet is the same as a Mercedes, so long as they don't break down and get you where you need to go safely.

That's not the definition of quality. Again, quality is qualitative, and often the combination of a number of quantitative aspects, none of which themselves define quality.

In a car quality is often associated with finish, safety, performance, comfort, materials, appearance, and reliability. Quality, to my knowledge and experience, is not dependent upon price.

You can fail any one of those things and still be quality; likewise you can excel at one of those things and still not be quality. If you're here to argue about lower priced substitute goods you're not talking about quality, you're talking about commodity.

As PC manufactures race to the bottom they have to sell more and more PC to make the same or less profit. This is also having a negative effect on Microsoft's profits too as they must charge OEM less and less for Windows licenses.

A race to the bottom usually refers to an individual seeking a more favourable outcome at the expense of others by upsetting an equilibrium to their own favour, only to cause retaliation by the other individuals, resulting in all participants having an overall less favourable outcome.

Two years later everyone's margins (and in some cases, profit) have fallen even as marketshare goes up. Classic race to the bottom where each company, in seeking a more favorable outcome, end up in a worse position.

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This typical Cupertino spin, and AFAIK the phrase is only used in the PC market, and is only used by Apple fans when denigrating the competition's approach to product and pricing.

Because it is the classic definition! If you don't know what it means, don't try to use it yourself.

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What is being referred to, with a negative spin, is the normal operation of competition and innovation in relatively mature markets.

Here's a normal and mature market: Cars.Can you tell me why a car today isn't 1/10th the price of a car from 10 years ago?

Yet in PC land, you can get a computer for 1/10th the cost of a modern computer from 1999. The same applies to consumer electronics. A DVD player from 1999 could be bought for $400, but today for $40. How can you not call that "race to the bottom"?

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Companies try to find the optimal product mix, which is a function of price points, features, total cost position of the company, market and brand image, distribution available.

Almost. You forgot to add, "In order to maximize profits".

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This exerts pressure on margins and profits, as well as on product features, logistics, distribution choices, manufacturing.

This is not a bad thing, its a good thing. It is the driver of innovation, which includes cost reductions.

Competition certainly is. Falling prices are not. In that less money is available to actually use for innovation.

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It does not lead to any disastrous consequences for anyone. Yes, sometimes companies go bust.

How is that not disastrous? The original manufacturer of the PC architecture, IBM, has entirely left the industry.

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Yes, sometimes they introduce products with the wrong combination of price, features.

And thus Dell drops from #1 to #3.

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Yes, the lead position in these markets changes from time to time. All perfectly normal, happens in all industries.

Correct. But race to the bottom is not normal at all.

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Get used to it. Or, if you don't like it, go work in the civil service or academia. But stop pretending that there is something dreadful about it, that only Apple is not engaging in. Apple is engaging with the same market in the same way, its just picked a niche business strategy.

Apple is most definitely not engaged in any sort of race to the bottom. They are not competing on price or margin.

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Which is fine, its one strategy which is open to anyone in every market.

Yes, have you not heard of the Dell Adamo, Adamo XPS, HP Envy, and HP TouchSmart?

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Its not open to all, and its not a feature of a market, but of a competitor.

That's a stupid statement. Can you name a single car manufacturer that hasn't tried to make an upmarket luxury brand? Ford->Lincoln, GM->Cadillac, Toyota->Lexus, Nissan->Infiniti, Honda->Acura?

Then there is HP->Envy, Dell->Adamo/XPS/Alienware, Acer->Gateway/Packard Bell, Lenovo->Think?

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Its like arguing that everyone but Hasselblad or Mamiya in cameras are engaging in a race to the bottom. No, they are not.

They are just targeting different segments. Which there is nothing wrong with.

Repeating the same mistake multiple times doesn't make it correct.

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At bottom, this race to the bottom stuff is just a concealed way of expressing a snobbish contempt for a market segment, and also for those with less money to spend on their computers.

It's a well established political and economical theory that has been observed many times. It's the classic example of the "Prisoner's Dilemma".

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What is true is that, for as long as it works, smaller market share with a niche strategy is associated with higher margins and often higher profits (though often also higher costs). But it has its risks too, as Apple found out in the nineties.

In the 90s Apple had the same strategy as Dell in the 2000s. Multiple intersecting product brands, multiple intersecting products, confusing branding and pricing, and competition with commodity manufacturers willing to fight on price alone.

Did you fail to notice in the last year that Dell has been attempting to reverse that trend with the Dell Adamo and Adamo XPS? Their Lattitude Z?

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And by definition, not all market participants can follow it.

No, all participants can follow it. As I said, just about every car manufacturer has an upscale brand. Likewise just about every PC manufacturer has an upscale brand.

Originally posted by Ally:This is a common misuse of the term 'quality', and its a revealing list. Kirby and Dyson are simply crap vacuum cleaners, but with a high end image. Lexus, unlike the rest of the equally good quality Toyota line, is luxury goods. KitchenAid is good durable workmanlike stuff, not particularly expensive and not a luxury good. What all these have in common? Image in someone's mind. To OC, these are all designer goods and there is a completely illusory association made between how good they are as cars, cleaners, mixers or whatever, and how much they cost. This confusion is then applied to Apple.

Well put. Sadly, you make yourself bait for certain elements with hours and hours to hack out replies laced with inaccuracy and a complete lack of logic. I gave up ages ago, and instead will let that element continue to live in their elaborately constructed world of self-delusion.

Some people perceive quality as a giant all-in-one behemoth you can't upgrade or fix easily, won't boot and comes with a cracked and yellowed screen - which the manufacturer refuses to replace. Personally, that isn't my perception of quality, but hey, whatever floats their boat.

Originally posted by Ally:This is a common misuse of the term 'quality', and its a revealing list. Kirby and Dyson are simply crap vacuum cleaners, but with a high end image. Lexus, unlike the rest of the equally good quality Toyota line, is luxury goods. KitchenAid is good durable workmanlike stuff, not particularly expensive and not a luxury good. What all these have in common? Image in someone's mind. To OC, these are all designer goods and there is a completely illusory association made between how good they are as cars, cleaners, mixers or whatever, and how much they cost. This confusion is then applied to Apple.

Well put. Sadly, you make yourself bait for certain elements with hours and hours to hack out replies laced with inaccuracy and a complete lack of logic.

Funny, I don't see you attacking Ally for his inaccuracies. Such as the fact that all PC manufacturers have upscale brands, and Apple is the exception because they don't have budget or entry level brands. Or that what PC manufacturers are engaged in actually is the classic definition of "race to the bottom".

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I gave up ages ago, and instead will let that element continue to live in their elaborately constructed world of self-delusion.

I do believe you're describing the 10% of the US population that owns 90% of all the resources (wealth, capitol, resources, etc).

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Some people perceive quality as a giant all-in-one behemoth you can't upgrade or fix easily, won't boot and comes with a cracked and yellowed screen - which the manufacturer refuses to replace. Personally, that isn't my perception of quality, but hey, whatever floats their boat.

As I believe I've already said elsewhere, what you just described is a defect. That Apple doesn't replace it is a disservice.

PC makers are not engaged in this mythical 'race to the bottom', whatever that is, they are just engaging in normal competitive behaviour. There is nothing negative about this. It is entirely normal for companies to compete, to try to lower costs, to compete on price among other things. It is entirely normal for industry leadership and market share to fluctuate as this competitive process works its way out. It is entirely normal for the profitability of an industry as a whole to go through cycles up and down.

There is nothing different or dysfunctional about the functioning of the PC market, and nothing dysfunctional about the behavior of either Dell, HP, Acer etc. What they are delivering for the buyer and society is increasing price performance and increased PC ownership and use, through the operation of the competitive market. These are good things.

Why have cars not fallen in price as much as PCs? Because there is no automotive analog to Moore's Law. An internal combustion engine is basically the same chunk of metal as it was 100 years ago. A computer today is not the same chunk of parts that it was in 1960, and if it were as similar, the reductions would be similarly smaller. It has nothing to do with one industry 'racing to the bottom' and the other not.

People buy on stuff which has nothing to do with product quality, some of the time. The only difference I can see between the watch I bought and now wear, and the others is: one, its at least as well made as them, probably better than many, two, it looks nicer, three, it says Timex on the dial and not Seiko or whatever. Now, the last is of no importance to me. It is not part of product quality. But to some people, although not part of product quality, its the most important thing about what they are buying. So, they try to redefine this into product quality.

Fact is, you do pay for branding. Partly because branding costs money to develop, partly because its valuable to some people as part of social networking. Fine, just don't pretend that branding is closely correlated with product quality in the usual sense, or that how much you spend is always closely correlated with product quality.

It is generally true over a period of years or decades that markets are efficient. It is generally true over time that 'you get what you pay for'. However, there are significant market imperfections, and in addition, what you pay for is not always product quality in the normal sense. See stock market prices as examples.

By the way, in Europe, birthplace of the Dyson, its been fairly well tested. They are not particularly good vacuum cleaners. Now you can redefine quality so that the Dyson is nevertheless, and despite being a worse vacuum cleaner, 'better quality' than the standard Miele or Bosch that you buy in John Lewis, or the better and much cheaper Panasonic ones that you buy in Argos. That just makes the term 'better quality' useless. It is however a usual debating tactic by the Mac adherents in these discussions.

Question for OC: what products by what other manufacturer compete in terms of your quality on level terms with the Mac lineup? Take one, say the Mini, or the iMac. If you are uninterested in price, and just want an equal or better quality alternative, what should you look at?

I suspect the answer will be, there are none, and that this will turn out to be true by definition.

Another question for OC: what is the difference between a 'race to the bottom' and normal competitive behavior, and where can I see an industry which, allegedly unlike the PC industry, has the second? And where else can I see an industry with a 'race to the bottom' in progress?

Originally posted by Ally:PC makers are not engaged in this mythical 'race to the bottom', whatever that is, they are just engaging in normal competitive behaviour.

Both are true. They are engaged in the race to the bottom (look it up, it's not mythical, any more than reindeer are), and they are engaging in normal competitive behavior. The race to the bottom is defined as normal competitive behavior where the participant has a worse outcome afterwards than they started.

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There is nothing negative about this.

Of course there is! Companies are going out of business or losing money! There is nothing negative for us, the consumer, because PCs are commodities and the next biggest competitor is always ready to step in to replace the one that just died, but there is definitely something negative for IBM (left the PC industry, thousands laid off), Compaq (thousands laid off, many products got canceled), Dell (losing market share, hundreds laid off), etc.

It is entirely normal for companies to compete, to try to lower costs, to compete on price among other things.

I never said otherwise. I never said the race to the bottom was some aberration.

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It is entirely normal for industry leadership and market share to fluctuate as this competitive process works its way out. It is entirely normal for the profitability of an industry as a whole to go through cycles up and down.

What I am trying to describe to you is an entirely different topic. Can you understand that? Let me put it to you this way: There is nothing dysfunctional about Apple's margins, nor Dell's attempt to go upscale.

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There is nothing different or dysfunctional about the functioning of the PC market, and nothing dysfunctional about the behavior of either Dell, HP, Acer etc. What they are delivering for the buyer and society is increasing price performance and increased PC ownership and use, through the operation of the competitive market. These are good things.

Yes. The only bad things are where Dell and HP (and IBM and Compaq) have laid off hundreds of thousands of people in the last ten years. I was one of those, at HP, so I think I understand the issues better than you (coming from the inside).

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Why have cars not fallen in price as much as PCs? Because there is no automotive analog to Moore's Law.

Idiotic. It isn't Moore's Law that have driven prices down, it is Moore's Law that have drive performance up. It's the race to the bottom that have driven prices down!

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An internal combustion engine is basically the same chunk of metal as it was 100 years ago.

Um, 100 years ago you would have been lucky to get 1/3 of a horsepower. 30mph was unheard of. Today it is trivial to get 400 horsepower and a vehicle that can go 200mph. Likewise you now have nearly zero emissions, 60 mpg, and 0 to 60 speeds of under 5 seconds.

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A computer today is not the same chunk of parts that it was in 1960, and if it were as similar, the reductions would be similarly smaller.

Hahaha! There is more similarity between a computer today and one from 1960 than a combustion engine. A transistor is a transistor, a resistor a resistor, a capacitor a capacitor. As an engineering student I had the pleasure of wiring together a 8086 CPU from scratch.

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It has nothing to do with one industry 'racing to the bottom' and the other not.

Yes it does. Racing to the bottom is exactly how prices fall.

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People buy on stuff which has nothing to do with product quality, some of the time. The only difference I can see between the watch I bought and now wear, and the others is: one, its at least as well made as them, probably better than many, two, it looks nicer, three, it says Timex on the dial and not Seiko or whatever. Now, the last is of no importance to me. It is not part of product quality. But to some people, although not part of product quality, its the most important thing about what they are buying. So, they try to redefine this into product quality.

Fact is, you do pay for branding. Partly because branding costs money to develop, partly because its valuable to some people as part of social networking.

You forgot the biggest aspect of branding; it's an encoding mechanism in a world that developed without always-on internet, mobile computing, and the ability to search. The brand gave people a way to gauge credibility when no other mechanism exists. Given that only 12% of the population have a smartphone with a usable web browser, brands are going to be critical for a few more years yet.

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Fine, just don't pretend that branding is closely correlated with product quality in the usual sense, or that how much you spend is always closely correlated with product quality.

Who said always? But I still assert brand usually does correlate to quality. Your watch, Timex, is still a brand. Acer is still a brand.

It just happens that there are more expensive brands. Your watch doesn't have kinetic recharging, your watch isn't capable of receiving phone calls, your watch isn't made to be waterproof or shockproof. Those things are expensive.

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It is generally true over a period of years or decades that markets are efficient. It is generally true over time that 'you get what you pay for'. However, there are significant market imperfections, and in addition, what you pay for is not always product quality in the normal sense. See stock market prices as examples.

Agreed. Or PCs. How else do you explain the sustained 10 year growth of the Mac market share from 2.34% to 4%, world wide? Some kind of vast conspiratorial con game?

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By the way, in Europe, birthplace of the Dyson, its been fairly well tested. They are not particularly good vacuum cleaners. Now you can redefine quality so that the Dyson is nevertheless, and despite being a worse vacuum cleaner, 'better quality' than the standard Miele or Bosch that you buy in John Lewis, or the better and much cheaper Panasonic ones that you buy in Argos. That just makes the term 'better quality' useless. It is however a usual debating tactic by the Mac adherents in these discussions.

No, it's mistake on my part, I'm not trying to dilute my argument. Here in the states we don't have those brands so Dyson "rises to the top". Likewise we don't have Nokia as a big player, so of course the best smartphones are RIM, Palm, and Apple. I hear in Europe Nokia is pretty big.

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Question for OC: what products by what other manufacturer compete in terms of your quality on level terms with the Mac lineup? Take one, say the Mini, or the iMac. If you are uninterested in price, and just want an equal or better quality alternative, what should you look at?

HP Touchsmart. Dell XPS One. Dell Hybrid Studio.

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I suspect the answer will be, there are none, and that this will turn out to be true by definition.

You're pretty stupid if that's what you assume.

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Another question for OC: what is the difference between a 'race to the bottom' and normal competitive behavior, and where can I see an industry which, allegedly unlike the PC industry, has the second?

The difference is that in a race to the bottom is competing on marketshare based on price, and the winner is the one with the highest marketshare, but unfortunately the lowest margins due to price pressure.

An industry that doesn't show this would be the auto market where you can compete on performance (HP), fuel efficiency (mpg), storage (cubic feet), towing capacity (tons), comfort (price), safety (crash ratings), and of course, budget.

It is only recently (in the last two years) have anyone other than Apple attempted to compete on build (Dell Latitude Z), weight (Dell Adamo XPS), etc.

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And where else can I see an industry with a 'race to the bottom' in progress?

I can't name any "in progress", only ones that are "finished".

Any industry where prices indicate a commodity and generic market. Wristwatches are one, now that you can get one for under $20. So are CD players. DVD players, too. Shoes, socks, dress shirts, and textiles in general; they all had their heyday hundreds of years ago and now they are defined purely by luxury (as in basic no frills up to ultra premium), as they are all more or less identical functionally.

PCs are more or less at the cusp of that transition when they are all more or less interchangeable and vary only in luxury. You can see some analogues: They are all outsourced and manufactured in the same plants (quanta, foxcon) the same way Nike, Rebook, Martha Stewart, JC-Penny, Levis, etc are all outsourced and manufactured in the same plants too.

Originally posted by Ally:PC makers are not engaged in this mythical 'race to the bottom', whatever that is, they are just engaging in normal competitive behaviour. There is nothing negative about this. It is entirely normal for companies to compete, to try to lower costs, to compete on price among other things. It is entirely normal for industry leadership and market share to fluctuate as this competitive process works its way out. It is entirely normal for the profitability of an industry as a whole to go through cycles up and down.

There is nothing different or dysfunctional about the functioning of the PC market, and nothing dysfunctional about the behavior of either Dell, HP, Acer etc. What they are delivering for the buyer and society is increasing price performance and increased PC ownership and use, through the operation of the competitive market. These are good things.

A race to the bottom usually refers to an individual seeking a more favourable outcome at the expense of others by upsetting an equilibrium to their own favour, only to cause retaliation by the other individuals, resulting in all participants having an overall less favourable outcome. For example, some companies may sell cheaper computers to increase market-share. However, to compete, they decrease their overall profit per computer, resulting in less profit per sale, less profit per sale resulting in less profit overall. This is a race to the bottom. The term only applies in cases where this competition results in negative results overall.

HP, Dell, etc,. add little value to a PC. If anything they are little more than box assemblers who slap a sticker on a box, in contrast to Apple who designs many of the components, technologies, operating system and eco-system into one seamless package.

If you buy HP or Dell you buying a brand, buy Apple and your getting an eco-system for your digitized life. Apple goes beyond brand which is why they can command higher prices, because they add value to the product.

Originally posted by Ally:PC makers are not engaged in this mythical 'race to the bottom', whatever that is, they are just engaging in normal competitive behaviour. There is nothing negative about this. It is entirely normal for companies to compete, to try to lower costs, to compete on price among other things. It is entirely normal for industry leadership and market share to fluctuate as this competitive process works its way out. It is entirely normal for the profitability of an industry as a whole to go through cycles up and down.

There is nothing different or dysfunctional about the functioning of the PC market, and nothing dysfunctional about the behavior of either Dell, HP, Acer etc. What they are delivering for the buyer and society is increasing price performance and increased PC ownership and use, through the operation of the competitive market. These are good things.

A race to the bottom usually refers to an individual seeking a more favourable outcome at the expense of others by upsetting an equilibrium to their own favour, only to cause retaliation by the other individuals, resulting in all participants having an overall less favourable outcome. For example, some companies may sell cheaper computers to increase market-share. However, to compete, they decrease their overall profit per computer, resulting in less profit per sale, less profit per sale resulting in less profit overall. This is a race to the bottom. The term only applies in cases where this competition results in negative results overall.

HP, Dell, etc,. add little value to a PC. If anything they are little more than box assemblers who slap a sticker on a box, in contrast to Apple who designs many of the components, technologies, operating system and eco-system into one seamless package.

If you buy HP or Dell you buying a brand, buy Apple and your getting an eco-system for your digitized life. Apple goes beyond brand which is why they can command higher prices, because they add value to the product.

Originally posted by Ally:PC makers are not engaged in this mythical 'race to the bottom', whatever that is, they are just engaging in normal competitive behaviour. There is nothing negative about this. It is entirely normal for companies to compete, to try to lower costs, to compete on price among other things. It is entirely normal for industry leadership and market share to fluctuate as this competitive process works its way out. It is entirely normal for the profitability of an industry as a whole to go through cycles up and down.

There is nothing different or dysfunctional about the functioning of the PC market, and nothing dysfunctional about the behavior of either Dell, HP, Acer etc. What they are delivering for the buyer and society is increasing price performance and increased PC ownership and use, through the operation of the competitive market. These are good things.

A race to the bottom usually refers to an individual seeking a more favourable outcome at the expense of others by upsetting an equilibrium to their own favour, only to cause retaliation by the other individuals, resulting in all participants having an overall less favourable outcome. For example, some companies may sell cheaper computers to increase market-share. However, to compete, they decrease their overall profit per computer, resulting in less profit per sale, less profit per sale resulting in less profit overall. This is a race to the bottom. The term only applies in cases where this competition results in negative results overall.

HP, Dell, etc,. add little value to a PC. If anything they are little more than box assemblers who slap a sticker on a box, in contrast to Apple who designs many of the components, technologies, operating system and eco-system into one seamless package.

If you buy HP or Dell you buying a brand, buy Apple and your getting an eco-system for your digitized life. Apple goes beyond brand which is why they can command higher prices, because they add value to the product.

Originally posted by OrangeCream:Dell and HP actually do design PCs. See the Touchsmart, Adamo, Envy, and Latitude Z products.

I'm aware of that. But what they do in comparison to Apple is the equivalent of slapping a brand box on a bag of generic Corn Flakes.

Dell and HP design the box, like Apple, but they don't design a heavily integrated OS nor are they in the business of designing productivity suites that come bundled with the OS or services that integrate all of their products into a single eco-system. Apple's even back back into the chip design business.

Dell and HP simply cannot provide that level of integration and easy-of-use, since they operate on a horizontal model vs. a vertical one.

In the 80's it was vertical, in the 90's it was horizontal, now we're seeing an equilibrium developing between the two models; thus the rise of Apple. Price-performance is no longer king. It now has to share a seat with the user experience which thrives on simplicity.

Originally posted by studentx:Please explain what you understand that I don't.

PS... Despite my login name, I'm not a student.

Thanks for being civil. I know I wasn't 100% polite in that reply.

The PC isn't a competitor with Apple; Apple is a part of the PC platform. You cite in your next post that Apple is adding some special sauce to their computers. This is patently false. There's no 'magic' to Apple. You try to create seperate notions because that's what Apple's marketing tells you is true - that's what Apple is selling, the conception that there is a difference. All of the facts support this notion: Apple has a commodity OS, with commodity hardware. PC has a commodity OS with commodity hardware. In no way are the two fundamentally different; they expose the same functionality, they have the same insides and outsides using the same base concepts to operate. Their quality control and design process are not substantially different.

Apple isn't a "platform" - it's a marketing badge. Like Centrino. Do you remember how, when it was launched, everyone laughed at Intel? Why would anyone pay an extra 20% to a) pad Intel's bottom line and b) pay for the marketing? And yet Centrino has been a massive success (several times larger than Apple, actually).

Apple is a part of the PC ecosystem. It's fun to talk about Apple, and that's why they're relevant. From a sales perspective, from a units moved perspective, from a technological perspective, from a user experience perspective Apple is entirely irrelevant (IN THE PC MARKET) - not because they are "so small" but because the efforts of a company don't have an impact in the marketplace.

Apple, believe it or not, is part of the race to the bottom. The difference is, that they are passing up the profits in 97% of it.

I'll go back to the same fundamental notion: If Apple was putting so much extra work into their hardware and software, their margins would be the same as Microsoft, HP, Dell. The reality is, their margins are much higher than HP and Dell (and much lower than Microsoft's). Why? Because they are selling the same product, for higher prices. That's the only quantitative difference. Everyting else is "taste" - and believe it or not the PC has more "taste" buyers than Mac does.

Bill Gates nailed it on the head at SIGGRAPH 2008, I think it was. "I admire Steve Jobs' sense of taste." He's certainly not a better businessman than the Dells' Gates' Otellinis' and Shens' and Hurds' of the world. He doesn't know better what users want. Apple has had as many flops in the last 8 years as they've had successes. AppleTV? Co-opted idea, can't compete in its segment (STB: Xbox 360, Wii, PS3, Blu-Ray). OSX Server. Co-opted idea, not even a rounding error in that market. iPod? Co-opted idea, massive success. iPhone? Co-opted idea, massive success.

When we're talking business, you really can't use Apple's marketing position ("We're different") to differentiate them. On every point they are the same or inferior to PC, and the sales numbers, units moved, market share, etc all support that.

Originally posted by studentx:Please explain what you understand that I don't.

PS... Despite my login name, I'm not a student.

Thanks for being civil. I know I wasn't 100% polite in that reply.

The PC isn't a competitor with Apple; Apple is a part of the PC platform. You cite in your next post that Apple is adding some special sauce to their computers. This is patently false. There's no 'magic' to Apple.

It's been measured multiple times now that Mac OS X has both better battery life and browser performance than IE (still the PC's default browser)

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You try to create seperate notions because that's what Apple's marketing tells you is true - that's what Apple is selling, the conception that there is a difference.

That's only partly true, but the existence of mobile OS X also cements the fact that there is indeed a difference between Apple and most PCs.

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All of the facts support this notion: Apple has a commodity OS, with commodity hardware.

Nearly commodity, except for the Apple SMC and integrated batteries that allow them significant power-performance advantages over Windows PCs.

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PC has a commodity OS with commodity hardware. In no way are the two fundamentally different; they expose the same functionality, they have the same insides and outsides using the same base concepts to operate.

Just like how a Lexus exposes the same functionality and have the same insides and outsides using the same basic concepts to operate as a Kia. Are you going to argue that there is nothing special in a Lexus over a Kia?

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Their quality control and design process are not substantially different.

Their design process used to be more different before HP's Envy or Dell's Latitude Z was released last year. Likewise Apple's prices used to be higher, too, but now with the Envy and Z we see that PCs can be just as expensive.

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Apple isn't a "platform" - it's a marketing badge.

Except for the fact that they happen to have a singular OS powering three different devices now (AppleTV, iPhone/iPod touch, and Mac), and possibly a tablet soon.

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Like Centrino. Do you remember how, when it was launched, everyone laughed at Intel? Why would anyone pay an extra 20% to a) pad Intel's bottom line and b) pay for the marketing? And yet Centrino has been a massive success (several times larger than Apple, actually).

Actually, Centrino improves battery life, reliability, and performance, compared to competing platforms (that were not tested nor integrated together). There are benefits outside of marketing... you just have to read the Ars article on AMD's own failure to compete against Intel to see how "together" Centrino was.

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Apple is a part of the PC ecosystem. It's fun to talk about Apple, and that's why they're relevant. From a sales perspective, from a units moved perspective, from a technological perspective, from a user experience perspective Apple is entirely irrelevant (IN THE PC MARKET) - not because they are "so small" but because the efforts of a company don't have an impact in the marketplace.

Well, except in design (Notice how the Envy and Z, Adamo, and even the Edge all look like Apple products), price (see above), battery life (see above), Vista and Aero look like OS X, how everyone created their own music stores, etc.

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Apple, believe it or not, is part of the race to the bottom. The difference is, that they are passing up the profits in 97% of it.

How do you figure when Apple makes more than Dell yet sells 1/10th the number of computers?

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I'll go back to the same fundamental notion: If Apple was putting so much extra work into their hardware and software, their margins would be the same as Microsoft, HP, Dell.

You have that backwards. Microsoft's margins are irrelevant because they don't ship PCs, and if they put extra work in their margins would be higher... and guess what, they are higher!

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The reality is, their margins are much higher than HP and Dell (and much lower than Microsoft's). Why? Because they are selling the same product, for higher prices.

Except again that they are actually more like a combination of Microsoft and HP, so it makes sense their margins are between the two.

On every point they are the same or inferior to PC, and the sales numbers, units moved, market share, etc all support that.

Yep, you're definitely having trouble with math...

Dont' have time to pick this apart right now, but what exactly does market cap have to do with Centrino sales? I didn't compare the market cap of Centrino to Apple I compared sales; and because we're comparing 'platforms' we need to (as I tried to many times in my post) limit the conversation to computers...not iPods and iPhones (which is memory serves makes up at this point a majority of Apple's revenue).

You're still missing the point. You go through a list of 'features' that come with 'all Macs' (not actually true). You don't realize that the same features are available on PC's...Apple is simply taking advantage of the economies of scale that exist in the same market they play in (the PC market) and selling a more expensive product with higher margins.

Dell has been doing the same thing for much longer than Apple (remember how cheap the first iMac was?). It's not a new strategy. The "newness" is the 'special marketing sauce' that has people like you coming into forums and telling people that Apple is adding something that was invented in the marketing department. They're not. There's no technical difference. It's all personal preference.

Dont' have time to pick this apart right now, but what exactly does market cap have to do with Centrino sales?

You're the one who said that the Centrino was a success several times larger than Apple. You first compared a brand/product with a company. One way to do so is to compare market cap; another is income or revenue.

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I didn't compare the market cap of Centrino to Apple I compared sales; and because we're comparing 'platforms' we need to (as I tried to many times in my post) limit the conversation to computers...not iPods and iPhones (which is memory serves makes up at this point a majority of Apple's revenue).

That's why he included net income numbers. Likewise if you look at the latest Q4 numbers you'll find that iPods account for 15%, Macs count for 40%, iPhones for 24% (GAAP). So iPods+iPhones == Macs. Of course if you go for the non GAAP you'll see that iPhones >> Macs+iPods.

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You're still missing the point. You go through a list of 'features' that come with 'all Macs' (not actually true). You don't realize that the same features are available on PC's...Apple is simply taking advantage of the economies of scale that exist in the same market they play in (the PC market) and selling a more expensive product with higher margins.

You conveniently ignored my post where I highlighted several things that are Mac only: A SMC (system management controller) that allows Macs to enjoy 20% to 40% more battery life than Windows, as well as hundreds of times better performance wrt to web browsing (IE vs Safari since IE is still the default).

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Dell has been doing the same thing for much longer than Apple (remember how cheap the first iMac was?).

$1,299 I think. What's your point? Today you can get one for $1,199 (or a Mac mini for $599).

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It's not a new strategy.

No, it's not a new strategy but it's one only Apple seems to have successfully implemented. 10 years and the iMac has only dropped in price by $100 (and gained a second core, increased in speed 15 times, increased in resolution 3 times, increased in storage 120 times).

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The "newness" is the 'special marketing sauce' that has people like you coming into forums and telling people that Apple is adding something that was invented in the marketing department. They're not. There's no technical difference. It's all personal preference.

It's all well documented at this point. Remember the Vista capable/ready debacle? Quartz has been running on Intel GMA style hardware (and even worse) since 2001. IE is well documented to be slower than Safari. And there is one more advantage to OS X that Apple continues to enjoy; immunity to Windows malware.

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Which is what the PC market is based on.

And it is those differences that continue to allow Apple to charge more.

quote:Originally posted by zelannii:Look: Netbook and other "secondary PCs" should not be considdered part of the computer marketshare, or if they are, they need to be listed seperately. Counting netbooks as part of the general marketshare is like saying Windows mobile phones should count in that sum as well... or Linux set top boxes and HTPCs...

VERY few people who have netbooks have only that computer, and most of those who do, regret it. Even Dell claimed HUGE NetBook returns when netbooks were purchased by customers to be primary machines...

That's ridiculous. You can't randomly decide that certain classes of PCs don't count as computers. Who gives a fuck if it isn't a primary computer, by that logic you would have to disqualify all laptops as a non-trivial percentage of them are "secondary" PCs.

If it runs a general-purpose computing OS and the same apps as a bog-standard desktop, it's a computer.

Smartphones obviously don't fall in there yet (but are rapidly on their way and likely will in another few years). Nor do Linux Set-Top boxes. There is no reason why a HTPC wouldn't count as a computer, the ability to run other applications is pretty much the distinguishing feature between a HTPC and a dedicated set-top box.

You have to agree that over the last few years this is actually becoming an issue? An iPad e.g. is a direct competition to Netbooks. Do they count those as computers in the sales statistics? At the low end with netbooks, tablets smartphones etc there is a lot of converging going on. The difference between a computer and an appliance is going to be even more blured.

Apple customers have been lead to believe that they are purchasing a "higher-quality" computer simply because it has the apple logo on it. For many years, apple has been using off-the-shelf components as any other PC maker. Even the most recent "apple" chips are being outsourced - manufactured by Asian companies who also make other microprocessors. But everyone knows that most apple customers buy apple products because they make them feel good about themselves - makes them believe that because they paid two or three times more for a product it must be better. Then they come up with lots of delusional thoughts to further believe that they do have a superior product (this is the well-know reality distortion field that Mr. Jobs has been pretty good at maintaining for a long time). In my many years of experience using both Apple and Windows machines, I've never noticed a significant difference between the two (other than the cosmetic ones) - both crash, break down, and malfunction like any other machine in the market. So the proclaimed superiority is nothing more than BS - and any company (such as google) could come out with a new PC or media device for a much lower entry point price, create a reality distortion field around it and sell as many or even many more than apple - and as long as people believe they are getting a "higher-quality" product - they will keep buying them.